Thursday, July 16, 2009

Winners and Losers: Power Industry Infighting Heats Up Over Climate Legislation

From ClimateWire via the New York Times:
The feuding clans of the electric power industry are quarreling over newer ground: which of them most deserves the free carbon emission allotments that would be distributed if the House-passed climate bill became law.

An unlikely alliance of public power providers, electric cooperatives, utility consumer advocates and utility commissioners joined together yesterday to attack the allotments provision of the House bill that they say would give windfall profits to merchant power providers with no assurance that the funds would be invested in reducing carbon dioxide emissions.

"The current provisions basically amount to a $4 billion annual giveaway" to the merchant generators, said Mark Crisson, president of the American Public Power Association, citing a study by Synapse Energy Economics Inc., of Cambridge, Mass., that APPA helped commission. It was released yesterday.

Representatives of the merchant generators immediately fired back. "This comes down to the idea that they can force us to buy [carbon] allowances from them," said John Shelk, CEO of the Electric Power Supply Association. "They can't say that out loud, so they essentially smear us with the politically charged term of 'windfall profits.'"

The House cap-and-trade bill would create a new kind of currency -- potentially worth $50 billion to $100 billion a year at the start -- in the form of free carbon allocations that permit power generators and factories to discharge carbon emissions without penalty. As the cap tightens over time, companies that could not reduce their emissions would have to purchase allowances from other companies or make offsetting investments that reduce greenhouse gas emissions.

The coalition of "strange bedfellows," in the words of former Rep. Glenn English (D-Okla.), yesterday urged the Senate to eliminate the portion of the allocations earmarked for merchant coal generators, amounting to 5 percent of the total. Local electricity distribution companies would get 30 percent of the emission allocations. The merchant share was added near the end of the House deliberations to secure more votes from coal state representatives.

Nuclear a likely big winner

Frederick Butler, president of the National Association of Regulatory Utility Commissioners (NARUC), said the allocations given to the local power distribution utilities, power co-ops and public power companies would be closely overseen by local regulators and boards....MORE
Here's the paper from Synapse Energy Economics:

Productive and Unproductive
Costs of CO2 Cap-and-Trade:

Impacts on Electricity Consumers
and Producers

(79 page PDF)